"We think the share price has risen slightly ahead of fundamentals, trading at a hefty 16x FY2025’s forecast P/E ratio. Earnings are expected to decline slightly next year as volumes normalise. However, the dividend yield of round 5% mitigates the downside," says Vijay Natarajan, vice-president, real estate and REITs, at RHB.
Earnings from new home sales are typically recognised with a two-to-four-month lag and gross margins of this segment are in the mid- to high-teens compared to mid-single digits for the resale segment. The outlook for new home sales remains positive from strong sales at new launches but is expected to moderate from a strong 1HFY2025, RHB says.
“We expect 2025 primary residential sales volumes (including executive condominiums) to be at 9,000-10,000 units (+30-40% y-o-y), while resale market volumes (private and public) are expected to remain relatively stable y-o-y,” Natarajan notes.
Year-to-date, ERA’s agent count has risen by around 3% to 8,894 agents, with a 24% market share.
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APAC Realty has proposed a one-for-five bonus issue to reward shareholders. The proposed bonus issue would result in a 16.67% increase in outstanding shares of 359.2 million. The bonus shares will also improve liquidity, since the stock's pre-bonus free float is a modest 35% RHB says. The record date for the bonus issue will be Sept 19.
A key upside catalyst would be unlocking value from the sale of ERA Centre, continued strong residential sales momentum, and fund flows from the EQDP programme.
APAC Realty ended at 94 cents on Sept 15, up 141% since the start of the year.
